Final Reading for 3Q GDP Mediocre

The Bureau of Economic Analysis released its third and final report on US gross domestic product in 3Q 2015 on Tuesday, with the annualized growth rate coming in at 2 percent during the quarter, a downward revision from the previous estimate.

The Bureau of Economic Analysis released its third and final report on US gross domestic product in 3Q 2015 on Tuesday, with the annualized growth rate coming in at 2 percent during the quarter, a small downward revision from the 2.1 percent of the previous estimate. Either one is a mediocre showing, considering that the rate in the second quarter was a much more robust 3.9 percent, when the economy was reviving from the doldrums of a harsh winter.

As always, GDP is a mix of factors, and the positives are still outweighing the negatives. The increase in real GDP in the third quarter reflected positive contributions from personal consumption expenditures—people spending their money—as well as nonresidential fixed investment (commercial real estate, among other things), state and local government spending, residential fixed investment, and exports. These were partly offset by a negative contribution from private inventory investment—businesses not spending their money quite as vigorously as before. Imports, which are a subtraction in the calculation of GDP, increased as the dollar continued to ride high.

Also on Tuesday, the National Association of Realtors reported that existing U.S. home sales dropped off considerably in November to the slowest pace in 19 months. Total sales fell 10.5 percent compared with October to an annualized rate of 4.76 million units; the last time the rate was so low was in April 2014. Sales in November were also 3.8 percent lower than the same month a year ago, which is the first time there’s been an annual drop since September 2014.

The Realtors posited a number of reasons why sales were down, such as the industry getting used to the new Know Before You Owe mortgage disclosure rule, which recently replaced four disclosure forms with two new ones. The disclosure process will ultimately be simpler, but it’s still new and presumably takes getting used to both for lenders and borrowers. The other factor that seems to be holding sales back—a more fundamental one—is a lack of inventory nationwide. NAR reported that total housing inventory at the end of November decreased 3.3 percent month-over-month to 2.04 million existing homes available for sale, which is 1.9 percent lower than a year ago. Unsold inventory is at a 5.1-month supply at the current sales pace.